Cheap gas plan meets with resistance

The government intends to introduce an alternative type of gas station to lower fuel prices in the country, but the plan has raised more questions than answers.

One association of oil product distributors has already threatened to pursue legal action if the government ploughs forward with the plan.

The Ministry of Knowledge Economy announced yesterday that it will roll out altteul (thrifty) filling stations that procure gasoline from the state-run Korea National Oil Corp. and the National Agricultural Cooperative Federation, also known as Nonghyup.

The plan is for the two bodies to lower costs by purchasing gasoline in bulk from local and foreign oil refineries before supplying it to these gas stations.

Nonghyup is already buying gasoline in large quantities from local oil refineries and supplying it to 300 gas stations that it operates under the name NH. KNOC said it will jump in the fray soon. Meanwhile, the government also intends to recruit independent gas stations to bolster the program.

Seoul intends to offer up to 23 million won ($20,336) to help these gas stations upgrade their facilities. As a further incentive, it will also provide low-interest loans to owners so they can install self-service pumps, which translates as extra convenience for consumers as these pumps accept credit cards. The government said this could reduce gas prices by up to 100 won per liter. The ministry hopes to increase the number of such stations to 1,300 by 2015, representing 10 percent of all gas stations in the country.

This is another ambitious plan by the government to try and tame soaring inflation, but critics have pointed to its myriad flaws.

Oil refineries claim it would be unprofitable for them to provide discounted gasoline to rivals that compete directly with their own gas stations and affiliates. And the Korea Oil Association said it would consider taking various actions, including legal measures, if KNOC goes ahead with providing financial support to independent gas stations.

“Helping [them] is unfair, and a public company that enters the oil distribution market could be a violation of the principles of fair competition,” the association said in a statement.

“It would be unfair if we provide gasoline to altteul gas stations at a discount, while keeping the regular price for others in the market,” said an industry official.

“I doubt that oil companies are willing to provide gas at a reduced price,” said one employee at the Korea Oil Station Association.

The government has been pressuring local oil refineries to cut their gas prices, but it has refused to reduce a related tax that accounts for half the prices that consumers pay.

By Limb Jae-un [jbiz91@joongang.co.kr]